Lilly to focus on new drugs in China, unload antibiotics brands and manufacturing facility for $375M

Eli Lilly is taking one step out of China so it can gain a firmer foothold with the other. Amid a national clampdown on antibiotics overuse, the U.S. pharma is selling Chinese rights to two legacy antibiotics and a manufacturing facility in a deal worth $375 million.

Rumors first arose last November that Lilly was looking to boot some declining off-patent medicines in China. Now, the company confirms that on the chopping block are decades-old antibiotic brands Ceclor and Vancocin, along with a manufacturing facility in Suzhou, China, that produces Ceclor.

Eddingpharm, a Sequoia profile specialty pharma focused on the Chinese market, is paying Lilly a deposit of $75 million, plus $300 million upon closing of the deal, for the assets.

Lilly expects to close the deal later this year or in early 2020. All employees at the manufacturing facility—about 250 in total—will be able to stay put and continue to work with Eddingpharm afterward, a company spokesperson told FiercePharma.

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The transaction doesn’t mean Lilly is taking less of an interest in China; instead, it will enable the company “to better focus our resources on the exciting new therapies that we are launching in our core therapeutic areas,” Lilly China President and General Manager Julio Gay-Ger said in a statement Tuesday.

In 2017, Lilly shuttered its China Research and Development Center in Shanghai—along with another R&D office in Bridgewater, New Jersey—and put in its place "Lilly China Innovation and Partnerships,” with an emphasis on collaborations with local firms and research institutions.

Under that flag, the U.S. drugmaker recently nabbed two Chinese approvals from its partners. Last September, Elunate, discovered by Chi-Med and being sold by Lilly, was approved in colorectal cancer and marked the first domestically made medicine for a major cancer type. Then in December, Innovent’s PD-1 inhibitor Tyvyt was cleared for Chinese use in classical Hodgkin lymphoma. A few weeks ago, Lilly itself pushed its GLP-1 diabetes drug Trulicity over the Chinese finish line.

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Lilly doesn’t routinely report sales numbers for Ceclor or Vancocin, but it may have a point in selecting those two for selloff.

China has taken the center spot in the global crisis of antibiotic resistance. A so-called superbug strain of Escherichia coli with the MCR-1 gene was first reported in China in 2015 and would later emerge in the U.S. in 2016, triggering a scare within the health community. E. coli with the gene are resistant to colistin, a last-resort antibiotic.

China has a long history of antibiotic overuse in livestock and humans alike. A study by the Chinese Academy of Sciences previously found 162,000 tons of antibiotics are consumed in China each year, more than half the world’s total. And antibiotics were once handed out by Chinese doctors like throat syrup to treat common cold.

The government obviously realizes the problem, having initiated several rounds of crackdowns on antibiotics overprescription since the 2000s, the latest being a decree (Chinese) by China’s National Health Commission last month that reiterated tight surveillance on antibiotic use.

On the other hand, as laid out in its National Action Plan to Contain Antimicrobial Resistance 2016-2020, the Chinese government is encouraging development of new antibiotics—and some companies have already taken notes.

Zai Lab, through a deal signed in 2017, licenses Greater China rights to Paratek Pharmaceuticals’ Nuzyra (omadacycline), which was recently approved by the FDA for community-acquired bacterial pneumonia and acute bacterial skin and skin structure infections. Everest Medicines, through an agreement inked in February 2018, holds Chinese rights to Tetraphase Pharmaceuticals’ Xerava, which was greenlighted by the FDA last August to treat complicated intra-abdominal infections.

Lilly isn’t the only Big Pharma company selling some older drugs in China to focus on newer products. AstraZeneca, for example, sold legacy antipsychotic Seroquel and Seroquel XR rights in the U.K., China and other markets to China’s Luye Pharma for a total of $538 million.

The antibiotics are just the latest foreign drugs Eddingpharm has licensed. In 2013, it got Chinese mainland rights to GlaxoSmithKline’s breast cancer drug Tykerb. And in 2015, it nabbed Greater China rights to Amarin’s Vascepa, a much-hyped fish oil-derived prescription drug that’s under FDA review to cut cardiovascular risks.